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Vertical Integration in Healthcare Impacting Referral Patterns

Provider organizations have touted the benefits of vertical integration, including greater efficiency, more care coordination, and simplification of the payment process. However, a study recently published in Health Affairs found that referrals to hospitals increased after vertical integration, resulting in millions more in Medicare spending.

For example, the monthly number of diagnostic imaging tests per 1,000 attributed beneficiaries performed in a hospital setting increased by 26.3 per 1,000, reports lead author Christopher M. Whaley, policy researcher in healthcare at RAND Corporation, and colleagues. Meanwhile, the number performed in a non-hospital setting decreased by 24.8 per 1,000.

Referrals for laboratory tests followed a similar trend, with hospital-based tests increasing 44.5 per 1,000 attributed beneficiaries and non-hospital-based tests decreasing by 36.0 per 1,000 after vertical integration.

With more hospital-based services, Medicare reimbursement increased after vertical integration. Specifically, average reimbursement rose by $6.38 for imaging tests and $0.57 for laboratory tests. While modest increases in reimbursement, the high-volume nature of these services translated to a combined $73.1 million more in Medicare spending for all ten imaging and laboratory testing services studied during the four-year period.

Whaley and colleagues say it is difficult to associate the increase in spending with better quality of care because of how […]

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